Centrica plc – initial response to the Ofgem announcement
Centrica plc notes the announcement by Ofgem that they are minded to recommend a Competition and Markets Authority investigation of the UK energy market.
Centrica is committed to an open, transparent and competitive British energy market and welcomes an objective review, by an independent and respected regulatory authority, that could help rebuild trust in the sector.
Competition in the energy market is intense and Centrica and British Gas reject any suggestion of possible tacit coordination with other market participants. In Britain's competitive energy market:
- Retail energy prices are among the lowest in Europe. British Gas retail margins in 2013 were just 4.5% after tax. Profits at British Gas Residential have been broadly flat for the last 5 years, rising by just 2% between 2009 and 2012 and then falling by 6% in 2013.
- Centrica has recently completed a 2-year £500 million cost reduction programme, of which £300 million related to British Gas.
- The number of energy retail suppliers is growing, with 19 competitors and increasing levels of switching. Competition in the wholesale gas and electricity markets is also very strong.
- Almost 80% of British Gas customer accounts are dual fuel, and the price of gas is the same whether a customer takes gas-only or is on a dual fuel tariff. Over 90% of British Gas customers have switched tariff or supplier at least once.
- Vertical integration is in the interests of customers, promoting security of supply and helping protect consumers from volatile price movements. Centrica leads the way in transparency of reporting, with the upstream and downstream businesses separated as legal entities in 2013.
We strongly support a comprehensive independent review that is free of political interference, with as swift a resolution as possible.
Sam Laidlaw, Chief Executive Officer of Centrica, commented:
"Anything that clears the air and helps rebuild trust in the industry must be a good thing. Britain’s energy market is highly competitive and we believe that a full independent review by a respected regulatory authority would demonstrate precisely that.
"Competition is working, providing choice for consumers and some of the lowest prices in Europe
“We hope that a lengthy review process will not damage confidence in the market, when over £100 billion of investment in new infrastructure is needed. A prolonged period of uncertainty could damage investment at a time when Britain’s energy security is being seriously challenged.
“For our customers, we offer competitive tariffs and were the first to cut prices this year. Our focus remains on providing affordable energy, excellent service and innovative products that help customers reduce their consumption and save money on their energy bills.”
Contact Centrica Media Relations: 0800 107 7014
British Gas Media Relations: 0800 107 7015
Centrica Investor Relations: 01753 494 900